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China is working to revive the ancient Silk Road trade routes from Asia to Europe under its transnational megaproject called the Belt and Road initiative.

With a monumental US$900bn worth of planned investments to build railways, ports and other infrastructure in 65 countries along the routes, the Belt and Road initiative is historically the biggest foreign investment strategy by any single country in world history.

Beijing’s new Silk Road plan has gained increased attention as opposition to free trade and open borders has increased in Western countries amid the UK’s Brexit vote and Donald Trump’ election as the United States’ president.

Here’s a look into what the Belt and Road initiative is about and how it could change the world’s economic and political map.

Why ‘Belt’ and ‘Road’?

The Belt and Road initiative is the signature policy of Chinese President Xi Jinping. The basic idea behind it is to boost trade and economic integration among the countries in the initiative through investments in roads, pipelines, ports, communication networks and other such infrastructure that promotes connectivity.

In September 2013, Xi paid one of his first state visits as China’s president to Kazakhstan where he proposed that China and Central Asian countries should could work together to build a Silk Road Economic Belt.

A month later, Xi said in a speech in Indonesia that China would strengthen cooperation with Southeast Asian nations in order to build a 21st Century Maritime Silk Road.

The two proposals were combined in the Chinese State Council’s action plan from 2015 into a grand concept called the One Belt, One Road (OBOR) initiative (一带一路 in Chinese). Lately, the name has been shortened in English into the Belt and Road initiative.

The two legs of the new Silk Road, however, are not single routes but rather consist of a network of links connecting different parts of China to the world.

The ‘Belt’ aims to link the western parts of China through six economic corridors to Central Asia, Russia, Europe, the Mediterranean and the Persian Gulf, and Southeast Asia, South Asia and the Indian Ocean.

Meanwhile, the ‘Road’ – somewhat confusingly – is a sea route designed to link China’s coastal parts to Europe and Africa through the South China Sea and the Indian Ocean in one route, and through the South Pacific in another route.

Altogether the Belt and Road initiative covers 65 countries, 4.4 billion people and over a third of the world’s GDP.

Massive infrastructure investments

Although the Chinese are not keen on the comparison, the fact that the Belt and Road initiative is multiple times larger than America’s Marshall Plan to rebuild Europe after World War II helps put its scale into perspective.

Close to a trillion dollars worth of investments are planned for hundreds of projects from railways through Thailand and Laos and air, road and sea infrastructure in Kenya, and satellites in low Earth orbit.

Some major projects already underway include the rail and highways linking China’s Xinjiang to the Gwadar port in Pakistan, the Khorgos “dry port” on the Chinese-Kazakh border that handles cargo train traffic to Europe, and the high-speed rail link aimed at connecting the Chinese-owned port of Piraeus in Greece to Central and Eastern Europe.

Most of the money for the projects will come from Chinese policy banks, such as China Development Bank and the Export–Import Bank of China, as well as the US$40bn Silk Road Fund that was set up in 2015. The US$100bn Asian Infrastructure Investment Bank, headquartered in Beijing, is also investing in countries along the Belt and Road initiative.

Chinese investment in Belt and Road countries hit US$14.53 billion in 2016, accounting for 8.5 percent of the country's total outbound investment.

Benefits

China itself will naturally benefit from the new Silk Road as it will connect the world’s largest trading nation with Europe, its biggest export market, and Africa, potentially the continent of future growth.

Meanwhile, investment in countries along the way could create new markets for Chinese exporters and help Chinese companies, such as construction, rail and telecom firms, to expand abroad just as economic growth and heavy investments are slowing at home.

The Belt and Road initiative is also aimed at helping China’s less developed Western regions which have so far benefited from the country’s rapid growth less than the coastal provinces in the east.

As most of the money would come from China, the initiative would also promote the internationalisation of the Chinese currency and bolster China’s political influence abroad.

But while Belt and Road initiative is clearly motivated by China’s domestic needs, Beijing insists that the initiative is open to everyone and offers benefits for each country involved.

China’s financial resources and expertise in infrastructure building could indeed benefit people in underdeveloped countries across Eurasia and coordinated investments in railways, ports and power plants could spur growth in trade among the countries.

According to Asian Development Bank’s latest estimate, 45 countries in the Asia Pacific would need to double their infrastructure spending to US$1.7 trillion a year to maintain growth momentum.

Risks

The ambitious plan faces considerable challenges too. First, there are no guarantees that China’s investment-led economic miracle over the past decades could be replicated in countries with very different economic and cultural conditions.

Security is a major concern in countries like Afghanistan and Pakistan and growing Chinese involvement may stir local opposition, like has happened in Sri Lanka earlier this year with Chinese investment in the strategic port of Hambantota.

The first direct train connecting China and Iran departs from the city of Yiwu in Zhejiang Province on January 28, 2016. Source: Ge Yuejin, China Daily

China needs to pay attention to local conditions and rules to avoid stumbling blocks such as the EU investigation launched into the Belgrade-Budapest rail project, a showcase for the Belt and Road project in Europe.

The political motivation in the Belt and Road initiative could also run against commercial logic and genuine infrastructure needs in different countries, leading to bad investment and financial losses. There is also a risk that some countries may not be able back their loans to Chinese lenders, which could worsen China's growing debt problem.

From a Chinese project into an international one?

With its Belt and Road initiative, China has proposed an ambitious vision for long-term economic development in the world.

Domestically the plan has spurred a lot of action and abroad Beijing has inked dozens of bilateral cooperation deals with other countries and international organisations.

Its challenge nevertheless remains to convince other countries that the Belt and Road train is worth jumping aboard and that the new Silk Road is truly an international project and not just an attempt to tie other countries into a China-centred production network.

At the Belt and Road forum in Beijing next weekend, where state leaders from 28 countries and over 50 heads of international organisations will gather, China will attempt to do just that.